Investment Trust Insider on Brexit and Aberforth

Investment Trust Insider on Brexit and Aberforth – James Carthew: Aberforth calm before the Brexit storm

The trouble with writing about Brexit is that, by the time this comes out, the whole story could have changed, although the chances of that seem remote somehow.

UK investors are rabbits in the headlights. A once healthy new issue market has evaporated, trading volumes have slumped and, occasionally, peculiar discounts and premiums are emerging as share prices of investment companies fail to react to moves in net asset values (NAV).

If this carries on, it could spell bad news for the investment company broking teams, who have already had to make some hard decisions about the provision of research coverage following Mifid II (which said that brokers needed to charge people to read their research).

Mifid II is one of those bits of legislation, like the awful ‘PRIIPs’ regulations, that were ‘imposed on us’ by the Europeans (or in this case the European Securities and Markets Authority) but, of course, we had some influence over such matters, until recently. Mifid II is maybe also a bit of red tape that the Brexiteers hope to be rid of.

The trouble is that Mifid II was embraced enthusiastically by the UK’s Financial Conduct Authority and therefore seems unlikely to be going anywhere. It is also one of the bits of legislation that we will have to learn to live with if we want to maintain equivalence with European rules so that our financial services industry can continue to trade with the EU.

The industry is becoming increasingly vocal about politicians’ seeming indifference to the future of the sector post-Brexit but, until we see headlines screaming about City job losses, there are few votes in promoting the needs of investment banks.

The political focus instead is on trading in goods. Plenty of investment managers and directors of trusts have opined on the likely impact on UK companies but Aberforth Partners, the managers of Aberforth Split Level Income (ASIT) investment trust, actually sent out a survey to all 93 of the companies that they hold in their funds. They got replies from 87 of them.